Taco Hut purchased equipment on May 1, 2021, for $12,000. Residual value at the end of an estimated eight-year service life is expected to be $3,000. Calculate depreciation expense using the straight-line method for 2021 and 2022, assuming a December 31 year-end. (Do not round your intermediate calculations. Round your final answers to the nearest whole dollar.)

Depreciation expense in 2021 = $750

Depreciation expense in 2021 = $1125

Explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

($12,000 - $3,000) / 8 = $1125

Depreciation expense each year would be $1125.

Depreciation expense in 2021

There are 12 months in a year, so the depreciation expense each month would be $1125 / 12 = $93.75

Number of months in 2021 for which asset is used ( May to December) = 8 months

$93.75 x 8 = $750

Depreciation expense in 2022 would be $1125 since the machine was used for a full year.

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